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Notice requirements of decreased health benefits in M&A transaction?


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What advanced notice, if any, is required to be given to plan participants when there is a significant change in health plan benefits due to a stock purchase transaction? 

Here's the situation - Company A is about to be bought by Company B in a stock purchase transaction. Company A currently participates in Parent Company's fairly rich health plan as part of a controlled group. Company A's participation in Parent Company's health plan will cease at the time of the transaction and Company A will sponsor a new MEC plan going forward. 

Parent Company (the Seller) doesn't want to give any notice whatsoever prior to the transaction. Purchaser is concerned about potential liability related to claims not covered by the MEC plan, that would have been covered by the Parent Company's richer plan, if employees are given zero notice. 

Does the 60 day advance notice requirement for changes during a plan year apply? I would think not, as the new MEC plan's plan year will not begin until the day following closing so it's not really a mid-year change. But it seems illogical that no notice is required in this situation. 

Any thoughts appreciated!

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The SMM requirement here is 60 days after adoption of the material reduction in health benefit.  

The SBC rules do require 60 days advance notice of a material modification, but that's generally not interpreted to include plan terminations.

Really you're looking at a generalized fiduciary obligation here to disclose, which is going to be a gray area.  But if the deal hasn't isn't public, I don't see how you could disclose even if you wanted to.

29 CFR §2520.104b-3:

(d) Special rule for group health plans.
(1)  General.

Except as provided in paragraph (d)(2) of this section, the administrator of a group health plan, as defined in section 733(a)(1) of the Act, shall furnish to each participant covered under the plan a summary, written in a manner calculated to be understood by the average plan participant, of any modification to the plan or change in the information required to be included in the summary plan description, within the meaning of paragraph (a) of this section, that is a material reduction in covered services or benefits not later than 60 days after the date of adoption of the modification or change.

Slide summary:

2023 Newfront ERISA for Employers Guide

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Solutions:

Parent Company or Company A upon sale, issue a Plan Termination Notice with Model Exchange Notice - English and Spanish.  If Company B is only offering a MEC plan, not a Minimum Value Coverage qualified plan (MVP), then Company A employees are eligible for a special enrollment period (60 days from loss of MVP Coverage) for Individual ACA Marketplace Coverage, with possible Advanced Premium Tax Credit and Cost Share Reduction Health Plan coverage. Four out of five enrolls pay under $20 per month and those under 250% of federal poverty are eligible for Cost Share Reduction Health Plan coverage.

The model notices are also available in Spanish and MS Word format at http://www.dol.gov/ebsa/healthreform/.

Company B is also required to offer the Model Exchange Notice:

Employers must provide the Exchange notice to new hires within 14 days of the employee's start date. Best practice: Include the Exchange Notice as part of the standard new hire materials.

 

Company A employees also have a year round opportunity to enroll in a Medical Share Program - two are advertised nationally - Medi-Share and Christian Health Ministries, see exclusions and enrollment requirements. Add a Prescription Assistance Program option - see attached as many of the Medical Share Programs do not cover Prescription Drugs. Many large agencies use Rx Help Centers and group billing is an option.  

Christian Healthcare Ministries | Healthcare cost sharing ministry

 
Christian Healthcare Ministries is a faith-based healthcare cost solution for Christians in all 50 states and around the world.

Prescription Assistance and Discount Programs.docx

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